Asset Purchase Agreements

Looking for a solicitor to help with an Asset Purchase Agreement?

An asset purchase agreement – sometimes called an APA or business transfer agreement – is the legal document used when a buyer acquires selected assets and rights from a business, rather than buying the shares in the company that owns it. If you’re buying or selling a sole trader business, a partnership, or specific assets out of a limited company, an asset purchase agreement is what you need.

I’m Steven Mather, and I draft, review and negotiate asset purchase agreements as a core part of my M&A practice. I act for buyers and sellers on asset deals ranging from small client book transfers worth £30,000 to substantial business sales worth several million pounds.

When is an asset purchase used?

An asset purchase is the right structure in several common situations. If the target business is a sole trader or partnership, a share sale isn’t possible – there are no shares to sell. In that case, an asset purchase is the only option. Even where the target is a limited company, a buyer might prefer an asset purchase because it allows them to pick and choose what they acquire. They can take the customer contracts, equipment, stock and goodwill, but leave behind any unwanted liabilities like debts, disputes or problematic contracts.

Asset purchases are also common in franchise resales, professional practice sales (accountancy firms, dental practices, financial advisory businesses) and situations where the buyer already has their own company and wants to bolt on the acquired business.

What does an asset purchase agreement cover?

The APA needs to clearly identify exactly what the buyer is acquiring. This typically includes goodwill and the business name, customer and supplier contracts (which usually need to be novated or assigned), equipment and machinery, stock and work in progress, intellectual property such as trademarks, domain names and software, and the benefit of any licences or permits.

Equally important is what the buyer is not taking on. The APA should make clear which liabilities remain with the seller – outstanding debts, pending disputes, historic tax obligations, and any contracts the buyer doesn’t want.

The agreement will also deal with the purchase price and payment terms, warranties from the seller about the business and its assets, restrictive covenants to prevent the seller competing or poaching customers, employee transfer provisions under TUPE, and any conditions that need to be met before completion.

TUPE – the hidden complexity in asset purchases

One area that catches a lot of people out in asset purchases is TUPE – the Transfer of Undertakings (Protection of Employment) Regulations. When a business or part of a business transfers from one owner to another, employees automatically transfer to the buyer on their existing terms and conditions. This applies whether you want those employees or not.

TUPE compliance is critical. Get it wrong and you face unfair dismissal claims, failure to inform and consult claims, and potentially significant financial exposure. I’ll make sure the APA deals with TUPE properly and that both parties understand their obligations.

Asset purchase vs share purchase – which is better?

Neither is inherently better – it depends on the circumstances. Buyers often prefer asset purchases because they can leave liabilities behind and get a clean start. Sellers often prefer share purchases because they achieve a cleaner break and the tax treatment can be more favourable (particularly with Business Asset Disposal Relief, formerly Entrepreneurs’ Relief).

If you’re not sure which structure is right for your deal, I’ll talk you through the pros and cons. You can also read more on share purchase agreements here. 

How much does it cost?

I work on fixed fees. For a standard asset purchase agreement, fees typically range from £3,500 to £15,000 plus VAT, depending on the complexity and value of the deal. Smaller transactions like client book transfers will be at the lower end. I’ll always provide a clear fixed fee before work starts.

Next steps

If you need an asset purchase agreement drafted, reviewed or negotiated, call me on 0116 3667 900 or email steven@stevenmather.co.uk. Free initial chat, fixed fees, and I’ll get things moving quickly.